Are business life insurance premiums generally tax deductible for the company?

The rule

The IRS considers premiums for policies where the business directly benefits (e.g., key-person insurance or entity-purchase buy-sell policies) as non-deductible expenses. This is because the death benefit, if paid, would be tax-free income to the business. There are exceptions, such as group life insurance for employees up to $50,000, but not for policies where the business is the direct beneficiary.

Facts that matter

• ✓Not tax deductible
• ✓Business beneficiary
• ✓Death benefit tax-free
• ✓IRS rule
• ✓Group life exception

Example structure

What lenders usually care about